'Goods needed for multilaterally funded projects exempt from CVD'
We had obtained an advance authorisation. We got the authorisation invalidated for direct imports and obtained the inputs from local suppliers against the invalidation. We could not export the final products. Now, we have been asked to pay the notional customs duty on the locally procured inputs. We are of the view that on locally procured goods, we should be asked to pay only the excise duty. Can you please clarify whether our stand is correct?
The demand of the authorities seems to be based on Para 4.28 (i) of the Handbook of Procedures, Vol. 1, which says that you have to pay “to customs authorities, customs duty on the unutilised value of imported/indigenously procured material along with interest". Your view does not seem to have any basis. It must be appreciated that your suppliers might have obtained not only exemption/refund of excise duty on the goods they supplied to you but also exemption/drawback of duty on inputs used in production of goods they supplied to you.
Our company has taken an order from a project which is funded by a multilateral funding agency and the Department of Economic Affairs has issued a public circular confirming that the project is eligible for deemed export benefits, if international competitive bidding (ICB) procedures are followed. Para 8.2 (d) of the Foreign Trade Policy (FTP) grants deemed exports status to the above category when legal agreements provide for tender evaluation without including the customs duties. But the tender floated by the project owner confirms that the evaluation will be without including basic customs duty (BCD), which means that all other duties in the customs duty structure is to be borne by the contractor who will be awarded the contract. In such a case, are we eligible for deemed export benefits?
You may check up whether there is any mistake in drawing up the tender document. As such, goods required for multilaterally funded projects are exempted from Additional Duty of Customs (CVD) also under customs notification no. 84/97 dated 11.11.1997. Therefore, the tender evaluation should be done without taking into account any customs duties. Anyway, as the tender documents say that the bids will be evaluated without including BCD only, the requirements under Para 8.2 (d) of FTP for grant of deemed exports status do not get satisfied.
As per S.No. 2 of Appendix-30A of Handbook of Procedures, Vol. 1, for import of drugs under Advance Authorisation against specific export order and pre-import condition, the export obligation period is 12 months from the date of clearance of the first consignment by the customs authority. In our case, the same authorisation allows import of other items also. Will the 12-month period start from import of any item or the ‘drugs’ only?
In my opinion, the 12-month period should start from import of ‘drugs’ only and not any other items. However, you may seek precise seek clarification on this particular point from the DGFT.
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